Turning theory into practice: implementing pillar two in the UK

HM Treasury and HMRC have launched a consultation seeking views on the domestic implementation of the OECD’s pillar two rules for a worldwide 15% minimum corporation tax rate for large multinational groups. The consultation focuses on two charging and collection mechanisms – the UK income inclusion rule and the UK undertaxed profits rule – with the overall aim of implementing the OECD model rules as closely possible. The consultation considers a number of issues including accounting matters; the charging mechanism; reporting and payments; potential safe harbours; and the interaction of the rules with UK anti-avoidance measures. In addition, a UK domestic minimum tax is proposed; this would be closely based on global rules but enable the UK, rather than a foreign jurisdiction, to charge a top-up tax in relation to any low-taxed profits of a group’s entities in the UK.